New Marketplace

Digital Health Care in China: Benefits and Pitfalls

Article · April 23, 2019

The American health care system is facing a time of unprecedented change, catalyzed by the confluence of such factors as unsustainable cost growth, a gradual shift toward value-based payment, the advent of potentially revolutionary technologies like artificial intelligence, emerging competition from companies small and large, patients who are increasingly consumer-oriented, and an aging Baby Boomer population. While there is no blueprint for how our system can and should evolve in this new context, there are lessons to be learned from other countries. Many of these same factors are playing out in China, and its experience offers insights for navigating these challenges.

Over the past 25 years, rapid economic growth has transformed China. The demographic changes are particularly striking: close to 400 million people are now considered relatively well-to-do, and 58% live in cities. These newly minted consumers have demanded not only goods such as cars and electronics (particularly smartphones), but also a better quality of life through improved health care.

While these changes were happening in China, the global tech boom was leading to the rise of giants such as Google, Apple, Amazon, and Facebook. In response, China fostered the development of its own Internet ecosystem. Today, Baidu (search), Alibaba (e-commerce), and Tencent (communication and social media) rank among the most valuable companies in the world by market capitalization. These companies have driven a smartphone-powered consumer revolution in China on a staggering scale: as of 2018, according to recent media accounts, more than 800 million Chinese citizens are active Internet users, and 98% of that use involves mobile devices. In addition, RMB ¥6.7 trillion (almost USD $1 trillion) exchanged hands through mobile payments in 2018, 16 million meals are delivered daily by the most popular food delivery app, and 43% of mobile users hail taxis with an app.

Creating an equally modern health care system has proven to be much more difficult and time-consuming. On one hand, China has been able to achieve considerably improved health outcomes while providing nearly universal coverage to its citizens. For example, it reduced infant mortality to 8 per 1,000 live births (2017), increased male/female life expectancy at birth to 75/78 (2016), and lowered the incidence of infectious disease.

On the other hand, these successes have also exposed the limits of the health care system. According to a joint study by the World Bank, World Health Organization, and Chinese government, the system struggles with regional disparities in care, over-utilization of acute hospitals, and national health care spending that has been growing 5 to 10 percentage points faster than GDP since 2008. On the primary care level, the country that created “barefoot doctors” — peasants trained to deliver basic health care in the countryside — now struggles with physician shortages in poor and rural areas and a distrust of undertrained clinicians. The overall result is a frustration with the health care system that, at times, even manifests as violence against health care providers.

E-Commerce Meets Health Care

The Chinese tech giants have, in turn, begun to see the health care system’s challenges as an opportunity to leverage their “anything, anytime, anywhere” consumer-focused approach to capture a new market with digital health care. While physicians, hospitals, and other providers may have more experience working within a heavily regulated environment and an ability to deliver specialized, high-acuity care, these tech companies benefit from a deep understanding of consumers, enormous financial resources, and the ability to innovate and scale their technology rapidly. This has positioned them well to meet the basic health care needs of a significant proportion of the population. This is particularly appealing in a country of 1.4 billion people whose government has placed a priority on advancing population health through its Healthy China 2030 program.

In one notable example, users of the popular payment platform Alipay, known to the Chinese public as a fast and safe financial transaction platform run by the e-commerce juggernaut Alibaba, can schedule appointments and pay directly for health care services and medications. Alibaba then leverages its logistics capabilities to easily deliver those medications from partner pharmacies in less than 24 hours. Seeking to capture more of the value chain, Alibaba established its Tmall pharmacy division to distribute over-the-counter drugs and medical devices to consumers.

Similarly, Tencent, whose WeChat communication platform has more than 1 billion users, is pursuing a “Smart Hospital” strategy to enable patients to schedule appointments with specialists, conduct virtual visits, and access personal health information such as diagnostics, imaging reports, and prescriptions. Tencent is also making inroads into ambulatory care, building a network of primary care and ambulatory surgery centers in eight cities, as well as communication, payment, and referral services for providers and patients. The “Doctorwork” network currently has about 30 sites and plans to expand to 300 centers by 2021.

The Chinese government itself wants to become a world leader in broad adoption of artificial intelligence (AI) across industries. In health care, this is seen as an opportunity to reduce health disparities and increase access for the entire country, as AI could eventually give even the lowest-skilled rural providers capabilities approaching those of the most experienced academic specialists.

While this technology is still young, Ping An Good Doctor (a leading Chinese health care platform) has begun installing unstaffed, AI-enabled kiosks, called “One-Minute Clinics,” in communities and work sites around the country. Users sit in a small booth and talk with an “AI Doctor” about their symptoms and medical history; the virtual doctor then makes a diagnosis and treatment recommendation. If necessary, the patient can talk to a physician by video, and the kiosk’s smart medicine cabinet can dispense more than 100 different medications. In the first 2 months of operation, the one-stop clinics, which are open 24-7, have reportedly served 3 million consumers.

The traditional health care system has been racing to keep up with this furious pace of innovation. Since 2014, public hospitals have partnered with technology companies to form “Internet hospitals” that offer both online and offline outpatient services. In this model, patients — particularly those based in rural areas — can visit a consultation clinic near their home and meet virtually (using webcam and text chat) with doctors from reputable hospitals. Information like blood pressure readings can be collected on site and uploaded so the doctors can make diagnoses and prescribe treatments, such as medications for common illnesses and chronic conditions. Patients can request follow-up visits and medication refills. As of last year, 119 of these government-certified Internet hospitals were in operation, according to the Chinese research company vcbeat.net.

Pitfalls of Digital Health Care

This evolving health care system has, in some cases, outpaced regulation, exposing a need for a more engaged and nimble governmental approach. This is highlighted by the story of Wei Zexi, a 21-year-old computer science student diagnosed with a rare form of cancer, synovial sarcoma, in 2014. After exhausting conventional treatment options, he found an article through Baidu’s search engine describing a reputable hospital that was reportedly offering a highly effective experimental immunotherapy codeveloped with Stanford University. His family spent close to USD $30,000 on this therapy.

Unbeknownst to Wei, this search result was a paid placement — something that Baidu did not make clear. The tech company also did not evaluate the credibility of claims made by this or any of its other health care advertisers. The treatment failed, and Wei died in April 2016. Before his death, he posted a short essay about his plight on Chinese social media, triggering a public outcry and a comprehensive investigation. News accounts said there was no collaboration with Stanford, the therapy’s efficacy was exaggerated, and the hospital was effectively owned by a private company that also owned the biotech company that produced the treatment.

As a result of the investigation, regulators forced Baidu to differentiate paid content from organic search results, review medical advertisers’ credibility before displaying their ads, and flag potential risks to consumers. Baidu also created a $150 million protection fund to support victims of false online advertising and other types of fraud on its platform.

Setting Policy for Technology in Health Care

In April 2018, 2 years after Wei’s death, the Chinese government issued guidelines to promote its “Internet Plus” health care initiative. These guidelines take a holistic view of the role that digital technology should play in health care in China, touching upon public health, primary care access, care delivery, payment, drug supply, medical and patient education, and the application of AI to both traditional and modern medicine.

While the guidelines established guardrails to protect patients, they also laid out a government-endorsed blueprint for a technology-enabled transformation of the Chinese health care system. This included creating a structured framework to expand the capabilities of the “Internet hospitals” mentioned earlier and encouraging tertiary and quaternary hospitals to support community providers through specialty teleconsults, the deployment of AI-based tools, and improved communication among technology platforms such as electronic health records.

Looking toward the U.S., our health care consumers also expect information, choice, and convenience. They will look to tech giants and emerging start-ups that fully embrace the “anything, anytime, anywhere” approach if they cannot find what they need. The question remains whether these technology companies will seek to more deeply engage with the existing health care system or aim to remake it in their own image, as has happened in China. Either way, U.S. health care providers, along with federal, state, and local regulatory agencies, need a nimbler approach to keep pace with innovation.

From a policy standpoint, learning from the Chinese example includes setting regulations to encourage adoption of, and reimbursement for, technologies such as telehealth and AI that can benefit patients in both urban and rural areas while also bolstering the ability of regulators to ensure the safety and efficacy of these new digital tools. This can also help foster greater collaboration among existing health care systems and established and emerging technology companies.

Finally, the discussions around privacy laws and regulation of new technology currently percolating in Washington should also examine how applications such as Facebook, Instagram, Google, and Amazon’s Alexa influence consumers’ health care decisions and health. All three groups — providers, digital technology companies, and regulators — will have to work hand-in-hand to produce the best possible results for patients. A health care model that successfully integrates digital and non-digital services will come about only through deliberate planning and engagement on all sides.

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